What would you think if you were told that the Federal Trade Commission was still participating in a frivolous lawsuit launched by the Obama administration during its final days on behalf of a liberal company with deep Democratic Party ties?
That's exactly what is happening in the case of an Apple-backed "anti-trust" suit designed to help the company avoid paying for the intellectual property it uses in the iPhone. Apple is engaged in a world-wide legal campaign against its suppliers, particularly Qualcomm, in an attempt to avoid paying full freight for the intellectual property that powers the iPhone. This despite the fact that Apple's recent earnings report indicated the company has a quarter-trillion dollars in cash largely stored overseas to avoid taxes.
In the case of Qualcomm, Apple is required to pay for the rights to use the technology that backs 4G – essentially what makes the iPhone an iPhone rather than the iPod Touch, a product that sells for hundreds of dollars less.
Apple – the most valuable and, arguably, most powerful company in the world – is claiming that it's being bullied by big bad Qualcomm. The company, which may be on its way to charging $1,000 per phone, according to some reports, has launched a global regulatory campaign to fight back against Qualcomm's supposedly excessive licensing fees, which some analysts have estimated to be as low as $15 per phone. The success of Apple phones owes quite a bit to the technology developed by Qualcomm, which helped revolutionize the smartphone by creating the technology that turns an iPod into a fully functional iPhone. Without Qualcomm's technology, that $1,000 iPhone would be nothing more than a $350 iPod Touch.
It's a story as old as dirt – corporate titans flush with cash and political connections get their crony capitalist buddies in government regulatory agencies to use the coercive power of government to punish their opponents. But just because the story isn't new doesn't make it any less disturbing – or wrong.
If Apple (and other companies) are able to run to government regulators here in the US and across the world to help them avoid paying a fair price for Intellectual Property they use, consumers will pay the ultimate price – because companies will no longer have the incentive to invest in research and development. Protecting the incentives for innovators to benefit from their creations is what drives the American technology ecosystem.
The political incentives behind this lawsuit are not hard to discern. Apple was a long-time supporter and advocate of the Obama Administration, and went all-in on Hillary Clinton becoming the 45th president. Once it saw that a new administration less sympathetic to Apple's antics would succeed the Obama Administration instead, Obama's FTC – then chaired by Obama's law school classmate – did a favor for this staunch Obama ally.
This is the swamp in action.
Maureen Ohlhausen, who was on the FTC when the lawsuit was launched and who was recently appointed Acting Chair by President Trump, has outlined clear opposition to this last minute Obama era action. She issued a rare dissenting statement when the litigation was approved. She wrote that it was premised on a "flawed legal theory that lacks economic and evidentiary support that was brought on the eve of a new presidential administration and that by its mere issuance will undermine U.S. intellectual property rights in Asia and throughout the world."
Ohlhausen's argument underscores the potentially devastating unintended consequences of the suit. The FTC's action effectively declared open season on U.S. intellectual property in China, Korea, and other countries around the world. Given the strong views laid out by the new Acting Chair, one would think the federal government would no longer be wasting its resources on this Apple hand-out. But that's not the case. Late last week, the FTC filed its opposition to Qualcomm's motion to dismiss the FTC's complaint.
The problem is that because of Democratic obstructionism and the slow process in getting nominees approved through the Senate, political appointees in the Trump Administration are not able to put a stop to this. Like many parts of the federal government, the FTC is not fully staffed. Only two of the five seats on the Commission are currently filled, but the Commission needs a majority of sitting commissioners to approve a policy change. That means that while FTC rules give the Acting Chair some influence over the course of the investigation, they prevent her from ending it outright until President Trump can nominate and the Senate can approve like-minded pro-intellectual property commissioners to join her on the Commission.
It's time to put an end to this farce of a lawsuit. President Trump should quickly nominate, and Senate Majority Leader Mitch McConnell should fast track, FTC nominees who respect intellectual property and the innovators who are making America great again.
Jenny Beth Martin is president and co-founder of Tea Party Patriots and the Chairman of Tea Party Patriots Citizens Fund.
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